IMF official warns global growth forecasts could be lowered in coming weeks

IMF Financial Counsellor Jose Vinals called on policymakers to take comprehensive measures to strengthen their economies.
IMF Financial Counsellor Jose Vinals called on policymakers to take comprehensive measures to strengthen their economies.PHOTO: BLOOMBERG

MUMBAI (REUTERS) - The International Monetary Fund may cut global growth forecasts further in the coming weeks, Financial Counsellor Jose Vinals said on Thursday, calling on policymakers to take comprehensive measures to strengthen their economies.

In January, the Fund projected global growth of 3.4 per cent in 2016 and 3.6 per cent in 2017, having revised down its October forecast for both years by 0.2 percentage point.

"It is very likely that by the time that we arrive at the spring meetings next month there may be a further downward revision in our forecasts," Mr Vinals said during an event organised by the Reserve Bank of India.

His comments echoed a warning last month from IMF Managing Director Christine Lagarde, who said the global economy could be derailed unless policymakers took collective action. "The cost of inaction will be costly in terms of global growth," Mr Vinals said. "I will argue that esteemed policymakers need to adopt urgently more comprehensive and concerted policy action to strengthen growth and manage financial vulnerabilities."

Expressing concern over China's slowing growth and highly stressed banks and corprates, Vinals said the deleveraging will be key to global financial stability. But he added that he did not foresee a hard landing for the world's second-largest economy.

Mr Vinals said India needed to prioritise a clean-up of its banks' balance sheets, while tackling the economy's debt overhang. He also said potential capital outflows also posed a risk.

Indian banks' stressed loans are at 13-year high of 8 trillion rupees (S$164.812 billion), constraining banks' ability to lend and boost economic growth.